Bogus Comparison Between Detroit In 1990 And Silicon Valley In 2012

from the apples-and-tomatoes dept

I've seen a few folks discussing a slide that was apparently part of a SXSW presentation, comparing Detroit in 1990 vs. Silicon Valley in 2012, with the crux of the argument being that while Silicon Valley has created plenty of value, it hasn't created jobs like Detroit did. Here's one version I saw from WSJ columnist Geoffrey Fowler:

This false comparison has led some to suggest that somehow Detroit in 1990 was better for the economy than Silicon Valley in 2012. But knowing a fair bit about both industries, that's an absurd and misleading comparison on multiple levels. First off, the employees: not all "job creation" comes directly from the big companies at the center of an industry. And, yes, there was a large ecosystem around the "big three" in Detroit that employed many other people, but the "multiplier effect" of jobs created by the internet by 2012, as compared to jobs created thanks to Detroit by 1990 is quite different. Part of the wonders of the internet is that it has enabled all sorts of new kinds of jobs, companies and careers that wouldn't have been possible before. If you summed up the entirety of direct and indirect job creation from the two industries, I'd bet a strong likelihood that the internet has had a much greater impact.

Not only that, but the type and quality of the jobs created by Silicon Valley today are likely to be much better than the grunt factory work that dominated Detroit. The internet has given more people control over their own jobs and careers, as opposed to becoming just a cog in the automaking machine, that left few options for employees in that industry. Furthermore, by 1990, Detroit was already in decline, its heyday having come decades earlier. By 1990, Detroit had been seriously eroded by competition from abroad (largely Japanese, but also from Germany and elsewhere), and we were talking about giant companies that were slow to react and change, and whose large employee bases were actually a lot more of a liability in innovating and keeping up with the times.

We've discussed in the past the paradox of job creation, highlighting that innovative companies often look like they're "destroying" jobs, because they take down lumbering, slow, legacy industries that have failed to innovate, but that employ tons of people in inefficient and often unnecessary jobs. Upfront, that looks like a job loss, but the innovation often creates new opportunities, new efficiencies and different (and frequently) better job options. There are some very real concerns for those who are not able or qualified to make the shift from one to the other -- and that's something that needs to be addressed. But to simply compare these two cases as if they were apples and oranges is horribly misguided.